Kalshi and Coinbase win partial injunction against Illinois

A federal judge has granted a partial preliminary injunction in Illinois, siding with Kalshi, Coinbase, and the Commodity Futures Trading Commission (CFTC) against state officials. U.S. District Judge Martha M. Pacold ruled that certain Illinois licensing requirements and criminal provisions likely conflict with the federal Commodity Exchange Act (CEA).

The ruling centers on the legal doctrine of preemption, suggesting that sports event contracts may be classified as swaps under federal law, placing them under the exclusive jurisdiction of the CFTC rather than state gambling regulations. While the injunction blocks the state from applying its licensing rules to the contracts in question, the court left the issue of Illinois transaction fees unresolved.

This decision creates a legal split within the Seventh Circuit Court of Appeals, as a Wisconsin judge previously denied similar relief in a related case that is currently under appeal. The parties must now propose specific terms for the injunction and provide further briefing regarding the state’s authority to apply wagering fees to these prediction markets.